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US Department of Energy

Crude stocks fell by 1.5 mb w/w to 482 mb, lower by 10 mb y/y, although the bulk of the draws were concentrated in the logistically isolated West Coast (-2.8 mb) compared to a build in the USGC (+1.8 mb). Runs rose w/w by 0.1 mb/d to 17.4 mb/d, while imports jumped by 0.21 mb/d w/w, to nearly 8.3 mb/d on higher arrivals from Saudi Arabia, Canada and Iraq. With autumn refinery maintenance set to begin in earnest in September (0.5 mb/d of US CDU offline) and peaking in October (1 mb/d of CDU offline), imports will need to fall from current levels to avoid stockbuilds. We expect this dynamic to play out, and for US stocks to fall by 13 mb between now and year-end. Although imports rose last week, they were still 0.5 mb/d lower y/y, compared to a near 0.6 mb/d y/y increase in runs. As we have stressed for some time now, it is strong refined product demand (up by 0.8 mb/d y/y in May) and exports to Latin America and the Caribbean (up by 0.44 mb/d y/y) that are boosting cracks and incentivising US refiners to dispatch their available capacity whilst simultaneously drawing product stocks. This, alongside 0.24 mb/d of US capacity additions y/y, is ensuring rude demand for crude at the prompt, pushing cash crude diffs up and tightening curve structure. There are some imminent headwinds for US crude balances, though. First, production is set to grow by 0.41 mb/d in H2 17 vs H1 17, just as runs come off during autumn turnarounds, although works are lower y/y. But this in itself is not an immediate concern, in our view, as the recent move in arbs and structure will push any excess material into export markets—and as long as underlying demand strength persists at current levels, refiners will return strongly post turnarounds.

Extract from oil products:

US gasoline stocks fell by 2.5 mb w/w to 227.7 mb, the seventh consecutive w/w decline, leaving inventories 10.5 mb lower y/y. PADD 3 led the draws, lower w/w by 1.2 mb, whilst PADD 2 draws were supported by the refinery-wide outage at Marathon’s 0.24 mb/d Catlettsburg refinery last week. However, PADD 1 stocks rose by 0.4 mb despite lower imports into the USEC and issues with the 52 thousand b/d FCC at Delta’s Trainer refinery as inflows into PADD 1C picked-up following strong draws over the past two weeks. Still, both Petrobras and Pemex were buying gasoline in Europe last week, which, combined with a string of European refinery disruptions that are drawing gasoline into the Mediterranean, should help to limit the amount of gasoline that needs to go to the US East Coast before the end of summer.